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FALL 2023

MESSAGE FROM THE EXECUTIVE BOARD Cornell Equity Research is proud to announce a remarkable fall semester marked by enthusiasm and dedication. We added ten new members to our club, representing five different undergraduate colleges at Cornell University. The executive board has continued its central committee and expanded our research coverage with the introduction of a new sector – Hospitality and Real Estate. With these changes, we continue to pursue our goal of reinforcing the club as a welcoming place for students from diverse backgrounds interested in finance. The new member education program brought in engaging internship panels, special speakers, and rigorous coursework. This Fall 2023 publication reflects the dynamic landscape of the current economic climate. Amidst the Federal Reserve’s pause on interest rate hikes at 5.25% – 5.50%, the longer-term borrowing costs witnessed a rise, signaling an economic cooldown. The WeWork bankruptcy revealed significant weakness in both the commercial real estate market and raised the alarm on comparable ventures. Retailers and consumers head into the holiday season with consumption uncertainty levels unseen since 2007. Moreover, geopolitical developments have significantly influenced market dynamics. Oil prices soared to $80 per barrel due to the disruption in the Red Sea and tensions in the Middle East. Israel’s transition to ground operations caused a 5.7% surge in Brent crude futures and US West Texas Immediate (WTI) Crude gained 5.8%, marking their highest daily percentage gains since April. With the complicated macroeconomic backdrop in mind, our team is thrilled to present our selected stocks for this semester. A huge thank you to the executive board, sector analysts, associates, and alumni for contributing to another rewarding semester! As usual, we cannot wait to continue to see how Cornell Equity Research will continue to grow!

EXECUTIVE BOARD President Emily Hong ech224@cornell.edu

Vice President Isaac Sosnoff ias42@cornell.edu

VP of Recruitment Kathey Chen kc837@cornell.edu

VP of Education Subharghya Das sd559@cornell.edu

VP of Publishing May Ton ct528@cornell.edu

VP of Public Relations Ahana Shrestha acs298@cornell.edu

Treasurer Laurent Vo lv232@cornell.edu

Executive Administator Melenie Mendez - Rangel mm2583@cornell.edu

Professional Development Arya Patel acp236@cornell.edu

Events Planner Avery Carter atc77@cornell.edu

Junior Member Liason Erin Limb el597@cornell.edu

Market News Victoria Gong vxg3@cornell.edu

Women's Group Leader Emiri Fukuchi ct528@cornell.edu

ENERGY

Jad Kassir | 11/28/2023

Rating: Buy Current Price: $123.64 Price Target: $153 Stop Loss: $96.01 Company Updates ● 52-Week Range: $98.52-144.82 ● Shares Outstanding: 0.5B ● Market Cap: $72.1B ● Net Debt LTM: $15B ● P/E LTM: 9.17 Competitor Statistics from Q3 2023

Investment Thesis:

EOG Resources (EOG) Innovating Energy

EOG Resources first joined the New York Stock Exchange in June of 1999. It has since become a national leader in the exploration, discovery, and production of crude oil, natural gas, and natural gas liquids. It pumps an average of nearly 1,000,000 barrels of oil a day and has pioneered many of the advanced drilling techniques being used today. This buy recommendation reflects the ability to perform under uncertain geopolitical conditions, strong earnings, and a renewed confidence in the importance of oil and gas in the modern world.

Valuation/Financial Modeling: As of November 28th, EOG Resources (EOG) is trading at $123.64. I believe that this equity is undervalued and expected to increase to $153.00 within the next 12 months. This conclusion is comparable to that of other equity research analysts and was obtained through comparable analysis.

Innovative Business Model: Net Income LTM: $11.2B Revenue LTM: $ 61.8B

Net Income LTM: $ 1.4B Revenue LTM: $ 10.2B

Net Income LTM: $ 3.7B Revenue LTM: $ 14.9B

EOG Resources covers all the downstream supply chains of the oil and gas sector, including exploration, discovery, and drilling. Its operations are centered in key United States onshore basins, including the Eagle Ford in Texas, the Bakken in North Dakota, and the Permian Basin in Texas. An American customer base and supply helps to protect against geopolitical conflict, which is especially valuable given the wars in Ukraine, Israel, and US-China tensions. EOG Resources has strategically positioned itself as a leader in the exploration and production of hydrocarbons from unconventional resources, with a significant emphasis on shale plays. It has been at the forefront of innovating advanced drilling technologies to extract hydrocarbons from shale formations effectively such as horizontal drilling and hydraulic fracking. These technologies enable the extraction of oil and gas from tight rock formations, which was traditionally challenging. EOG Resources is also leading in operational efficiency and resource management with the early adoption of data analytics and machine learning algorithms to slim down margins and maintain success throughout the business cycle.

Financial Statements: EOG Resources has a 55.6% gross margin which is much higher than many of its competitors, making it a compelling investment. It also has a moderate dividend that has increased almost annually for years. With a net 0.9B net cash position, the company is significantly cutting down on its liabilities and is putting itself in good shape for the future.

Jad Kassir | 11/28/2023

EOG Resources has relatively lower P/BV, indicating undervaluation

Source: Capiq Risk Potential Demand: As an energy business, EOG Resources operations and financial performance are materially impacted and tied to changes in commodity prices. Higher demand is typically linked with economic prosperity, meaning that recessions or low growth could negatively affect stock performance. However, it appears the market in the United States has turned bullish with increased consumer confidence, lower inflation, and stable or lower interest rates.

Global Supply: Increased supply from existing sources such as OPEC+ or the development of new sources by other sovereigns or organizations tends to decrease commodity prices. However, in June of 2023, OPEC announced production cuts for 2024 and in July of 2023, Saudi Arabia announced its own cuts on top of this. These cuts pushed future price estimates to over $100 per barrel. Additionally, supply-side risks for EOG Resources include increased production costs and drying oil reserves.

Competitors: EOG Resources faces both private and public competitors, some of which receive substantial sovereign support and funding. EOG Resources hydrocarbon-centered product offering may also be impacted by government and corporate sustainability targets to decrease fossil fuel use in the coming decades. If these customers were to shorten their timelines, EOG Resources would find it very difficult to swiftly pivot to more sustainable energy options than some other competitors.

Sources:

Emma Braff | 11/18/2023

Rating: Buy Current Price: $104.96 Price Target: $121.00 Stop Loss: $98.02 Company Updates ● 52-Week Range: $120.7-98.02 ● Shares Outstanding: 3.9B ● Market Cap: $9.49B ● Net Debt LTM: $8.3B ● Dividend LTM: $4.59 ● P/E LTM: 10.05

Exxon Mobil Corporation (XOM) Fueling the Future Investment Thesis: ExxonMobil represents the largest publicly traded oil company outside of Saudi Arabia’s Aramco. Operations include Upstream, Energy Products, Chemical Products, and Specialty Products segments. Acreage holdings primarily exist in the U.S. (9.5MM net acres), but are also present in Canada, South America, Germany, The Netherlands, UK, with smaller holdings in Africa and the Middle East. This buy recommendation reflects ExxonMobil’s merger with Pioneer Natural Resources (PXD), lithium drilling activity, ability to perform under uncertain geopolitical conditions, and strong balance sheet.

Valuation/Financial Modeling: Competitor Statistics from Q3 2021

As of November 18th, ExxonMobil (XOM) is trading at $104.96. I believe that this equity is undervalued and expected to increase to $121.00 within this year. This conclusion is comparable to that of other equity research analysts and was obtained through comparable analysis.

Diversified Business Model: Net Income LTM: $41.1B Revenue LTM: $350.4B

Net Income LTM: $29.3B Revenue LTM: $339.2B

ExxonMobil covers all parts of the oil and gas sector, including drilling, pipelines, and refining, which acts as a partial hedge to oil price fluctuation, especially as compared with other companies in the sector. A comprehensive North American segment also helps to protect against geopolitical conflict, which is especially valuable given the wars in Ukraine, Israel, and US-China tensions. The company has also started to drill for lithium in Arkansas in its play to become a major EV battery supplier in the US by 2030, with plans to begin producing battery-grade lithium by 2027.

Balance Sheet: The low debt-to-equity ratio of 0.2 is lower than that of competitors, which means that ExxonMobil can issue debt to continue business operations if oil prices fall. A strong dividend has also been increased annually for 41 years. With almost $33B in cash and an AA credit rating, the company has room to make investments along with rewarding shareholders.

Net Income LTM: $25.7B Revenue LTM: $226.0B

Acquisition: The all-stock transaction of Pioneer Natural Resources (PXD) provides access to the Permian Basin, which is the highest producing oil field in the United States. It also ended the previous quarter with a strong balance sheet and capital structure.

Emma Braff | 11/18/2023

XOM has relatively lower TEV/Forward EBITDA, indicating undervaluation

Source: Capiq Risk Potential Decreased Demand: As an energy business, ExxonMobil’s operations and financial performance are materially impacted by changes in commodity prices. Higher demand is typically linked with economic prosperity, meaning that recessions or low growth could negatively affect stock performance. Changes in government policy support for oil and gas are also risk factors.

Supply Factors: Increased supply from existing sources such as OPEC+ or the development of new sources by other sovereigns or organizations tend to decrease commodity prices. That being said, a decrease in supply could support commodity prices; for example, oil prices inch higher following some weakness as all eyes turn to OPEC’s meeting in Vienna on November 26. Furthermore, supply-side risks for ExxonMobil include increased production costs.

Competition: ExxonMobil faces both private and public competitors, some of which receive substantial sovereign support and funding. ExxonMobil’s hydrocarbon products may also be impacted by government investment in alternative energy sources. This includes a faster than anticipated transition away from fossil fuels.

Sources:

Arya Patel | 11/28/2023

Rating: Buy Current Price: $125.87 Price Target: $168.65 Company Updates / News ● Market Cap: 14.54B ● Beta: 1.34 ● EPS: $28.20 ● PE Ratio: 4.39 ● EV/EBITDA: 1.7x ● 52 Week Range: $112.00-$293.01 ● In October 2023, BofA Securities downgraded the stock from “neutral” to "underperform", causing shares to drop by nearly 10% ● In September 2023, Albemarle Corp settled FCPA violations for $103 Million Competitor Statistics 2023 FQ3 LTM

EV/EBITDA: 1.7x Revenue: $9.29B

EV/EBITDA: 3.1x Revenue: $12.27B

Albemarle Corp. (ALB) LI-ghting the EV Era Investment Thesis: Albemarle Corp. (NYSE: ALB), a leading player in the lithium industry, faces 2023 challenges marked by a 42% stock decline amid the Liontown Resources acquisition failure and declining lithium prices amid an electric vehicle slowdown. Despite near-term headwinds, Albemarle strategically adapts with revised sales growth and capital expenditure plans, positioning itself for potential long-term growth in critical industries. The Buy recommendation reflects confidence in Albemarle's adaptability, current valuation, and its enduring role in advancing essential technologies, making it a prudent choice for long-term investors.

Valuation/Financial Modeling: As of November 28th, 2023, Albemarle was trading at $125.87 per share with a market capitalization of $14.54 billion. I believe the firm is undervalued and will be trading at $168.65 with an equity value of 19.79 billion in the next 5 years. I conducted a comparable analysis with a growth rate of 1.78% and selected the 50th percentile multiple of EV/ Revenue.

Failed Acquisition and Restructuring: Albemarle's recent decision (10/16/23) to cancel the $4 billion acquisition of Liontown Resources (LTR.AX), a major Australian lithium mining company, holds significant implications for its strategic growth. The deal aimed to secure access to the valuable Kathleen Valley lithium project but faced challenges, including an activist investor's increased stake in Liontown. The abrupt termination reflects growing complexities in the lithium market, impacting Albemarle's resource expansion plans. In response, Albemarle embarked on a restructuring journey, reconfiguring a joint venture and investing substantially in a lithium hydroxide processing facility in Australia. Investors should closely monitor Albemarle's adjusted growth strategy post the failed acquisition and assess whether its restructuring positions the company for resilience and success in a challenging market.

ESG Implications: EV/EBITDA: 6.6x Revenue: $32.45B

EV/EBITDA: 1.6x Revenue: $9.38B

Albemarle faces scrutiny in its environmental and social practices amidst EV market challenges and a foreign bribery probe. Investors concerned with environmental, social, and governance (ESG) factors will closely evaluate Albemarle's response to these challenges. Maintaining a strong ESG profile is vital for long-term sustainability and reputation, making it imperative for Albemarle to transparently address any issues arising from legal matters.

Arya Patel | 11/28/2023

Albemarle vs. Competitor’s Change in Stock Price

Sources: S&P Capital IQ Risk Potential Slowdown in Market Demand for Electric Vehicle The EV market faces a demand slowdown, a significant challenge for Albemarle. High interest rates reshape the landscape, impacting climate regulators and automakers. GM and Honda ending their partnership and LG Energy Solution's warning of lower EV demand due to economic uncertainties underscore this shift. Global automakers like Ford and GM adjust EV production plans in response to changing economic conditions. Despite strong EV sales, exceeding 300,000 units in Q3 in the U.S., the unexpected influence of interest rates on monthly payments poses a challenge for Albemarle in the lithium market.

Competition from Chinese Producers Albemarle faces heightened competition from Chinese lithium producers, posing a threat to its market share. Acknowledging the risk amid a broader slowdown in demand and falling lithium prices, Albemarle grapples with an industry-wide supply glut and weakened global electric vehicle demand, intensifying the competitive landscape. Investors must watch for Albemarle's strategic responses and innovations to counter the growing influence of Chinese players, crucial for sustaining growth and market leadership in the dynamic lithium market.

Falling Lithium Prices and Global Economic Trends: Albemarle's fortunes are closely tied to the trajectory of lithium prices, which have experienced a sharp decline. The slump, attributed to a supply glut and uncertainties in the global economic landscape, poses a direct challenge to Albemarle's financial performance. Falling lithium prices, down approximately 67% this year, impact the company's revenue and profitability. As Albemarle navigates this scenario, investors should closely monitor how effectively the company adjusts its operations, manages costs, and sustains profitability in a market characterized by volatility. Moreover, the broader economic trends, including high interest rates affecting EV demand, underscore the need for Albemarle to demonstrate adaptability and strategic agility to weather the cyclical nature of the lithium market. Sources:

Raheem Amany | 11/28/23

Rating: Hold Current Price: $77.36 Price Target: $95.14 Company Updates / News ● Metrics on Guidelines ● Recent updates about the company, the industry, and/or economy if applicable

Solaredge Technologies (SEDG) Cooling Star? Investment Thesis: Since going public in 2015, Solaredge’s stock maintained strong pricing until 2023. Since March 2023, the stock has steadily declined from $320.85 to $77.36 now. My hold recommendation reflects a belief that Solaredge will return to its former success in the long run, but the increasing tension in Israel where the company is based must be resolved before then.

Valuation/Financial Modeling:

Competitor Statistics from Q3 2021

As of November 27th, Solaredge (SEDG) is trading at $77.36. I believe that this equity is undervalued and expected to increase to $95.14 within the next 12 months. I arrived at this conclusion by conducting a DCF analysis with a 5% growth, 6% operating margin, and a discount rate of 6.7% across 5 years. I used these assumptions based on historical data and a realistic view given Solaredge’s performance history, but also the current challenges faced by the company specifically and the industry as a whole.

Power Optimization: Power Optimizers are a type of electronic or module that collects and feeds solar energy production data, such as output voltage. and peak efficiency, from each private module to a cloud and then back into the inverter. This in turn reports power and financial performance back to the consumer in real time. Such an innovation enables consumers to rely on solar energy for the energy and electricity needs while maintaining, if not improving efficiency.

Revenue: $3.55B

Solaredge Technologies was the first company to commercialize Power Optimizers. Their patented DC-Optimized technology maximizes energy production and is also available for both commercial and residential applications, making their customer base a lot wider.

Sustainable Innovation: Revenue: $1.83B

Since its inception in 2006, Solaredge is credited with the Innovation Award from the Intersolar Awards Committee on two separate occasions for its specialized Power Optimizers and the Single-phase Inverter. Solaredge systems are now present in over 140 countries because of the international recognition of the efficiency and effectiveness of Solaredge’s solar energy solutions for commercial and residential needs.

Revenue: $551M

Raheem Amany | 11/28/23

Graph Title:

Source: Yahoo Finance Risk Potential Israeli War: Correlating with Solaredge’s drop in stock price was the rising tensions between Israel, where Solaredge is headquartered, and Palestine. With the two countries currently at war with each other, the security of the headquarters has become a priority and there is less focus in Israel currently on solar solutions given the more pressing matter of the political and national landscape.

Allegations: In November 2023, Solaredge shareholders were informed of a class action lawsuit being formed against the company after allegations forming from October 2022 centered around criminal negligence. The claims against the company state that their failure to notify consumers about failing 3G services and that in order to rectify the issue, the affected consumers were told to pay for costly upgraded technology, despite being under warranty. Allegations of this nature are harmful for the company’s public perception and the legal ramifications will also take time and resources to navigate.

Declining Demand: The market for solar energy companies is harshly competitive given the high cost required to manufacture and install the technology. On October 20, 2023, the SEDG stock dropped 35%. This his been attributed to order cancellations across Europe as well as the rising interest rates and declining availability of money for large home upgrades decreasing demand for solar energy technology.

Sources:

INDUSTRIALS

Adelyn Carney | 11/16/2023

Northrop Grumman (NOC) Large-Scale Contracts and Projects

Rating: Buy Current Price: $463.51 Price Target: $493.76 Company Updates/News ● Market Capitalization: $70.03B ● Selected to train Air Force personnel to operate the BACN payload and platform. ● Successfully completed the first flight of Australia’s multi-intelligence MQ-4C Triton uncrewed aircraft. ● Delivered rocket booster segments for NASA’s Artemis II Mission. Competitor Statistics from Q3 2023

Investment Thesis: Northrop Grumman is an aerospace and defense company specializing in air, space, land, sea, and cyber products and services. It operates in four sectors: Aeronautics, Defense, Mission, and Space Systems, developing aircraft, spacecrafts, radar, laser systems, and offering military training and communications. Northrop Grumman operates over 550 facilities across all 50 U.S. states and more than 25 countries, delivering services globally to customers in 25 nations. My buy recommendation reflects the belief that Northrop Grumman’s share price will increase through its valuable contracts and its investments into autonomous systems.

Valuation: As of November 16th, Northrop Grumman (NOC) shares are trading at $463.51. I believe that this equity is undervalued and expected to increase to $493.76 within the next year. I arrived at this conclusion by conducting a Comparable Company Analysis, comparing Northrop Grumman to Raytheon Technologies, L3Harris, Lockheed Martin, BAE Systems, and Honeywell, and using the P/E valuation multiples.

Extensive and Major Contract Achievements: Revenue: $9.77B

Revenue: $4.91B

Northrop Grumman has secured high-profile major contracts. In October 2023, it won contracts from the Space Development Agency (SDA), the U.S. Navy, the U.S. Air Force, and Korea Aerospace Industries. The largest contract came from the SDA, valued at approximately $732 million. It involves building 38 data transport satellites to help advance the SDA’s Proliferated Warfighter Space Architecture, an effort to launch a large network of satellites into low-Earth orbit to enhance warfighting capabilities.

Autonomous Systems: Revenue: $16.88B

Revenue: $9.21B

Northrop Grumman has recently invested a lot in its autonomous systems. One of its biggest projects is the MQ-4C Triton. This is the only unmanned, high-altitude long endurance aircraft that provides real-time intelligence, surveillance, and reconnaissance over vast ocean and coastal regions. The U.S. Navy received its first multi-intelligence configuration MQ-4C Triton in February 2022, and it plans on ordering 68 in total. In 2018, the Australian government also agreed to buy an MQ-4C Triton for $1 billion. On November 9, 2023, the first flight of Australia’s aircraft was successfully completed, and it is expected to be delivered in 2024.

Adelyn Carney | 11/16/2023

Northrop Grumman Revenue 2009 - 2022

Northrop Grumman Revenue (in Billions) 40

36.799 33.841

35.667

36.602

30.095 30

27.65

28.143

26.412

25.218

24.661

23.979

23.526

2012

2013

2014

2015

24.706

26.004

20 15 10 5

0 2009

2010

2011

2016

2017

2018

2019

2020

2021

2022

Source: Macrotrends Risk Potential U.S Government Contracts: The U.S Government is Northrop Grumman’s primary customer, accounting for 86% of total revenues. Consequently, Northrop Grumman’s fiscal performance is highly dependent upon its objectives. If the Department of Defense is looking to scale back its purchasing of defense weapons, this could severely hurt Northrop Grumman’s sales.

Fixed-Price Contracts: A great deal of estimation goes into projecting the cost of a project. These projects

come with a lot of variability, including supply-chain costs and labor costs, causing potentially inaccurate estimates. This is a problem when dealing with fixed-price contracts. A large portion of Northrop Grumman’s contracts are fixed-price contracts. Although this can be beneficial if the company improves upon efficiency and completes the project in a cheaper and/or quicker manner, it can also bring about major financial losses if time and/or resources are underestimated. For example, Northrop Grumman received a $934 million fixed-price contract from NASA in July 2021 to build the Habitation and Logistics Outpost module. In Q2 of this year, it was announced that the company experienced a $36 million loss on this contract due to evolving architecture and requirements and macroeconomic factors.

Defense Contractor Competition: There are hundreds of defense contractors that customers can choose

from: Lockheed Martin, L3Harris, Raytheon Technologies, and General Dynamics, just to name a few. Northrop Grumman must distinguish itself from its competitors to win contracts. This could include offering riskier contracts to attract customers. For example, Northrop Grumman might offer a fixed-price contract with a smaller estimated profit margin to win a bid. However, if the initial cost was underestimated, this could result in a revenue loss. Sources: Northrop Grumman | Northrop Grumman Investors| Northrop Grumman Newsroom | U.S. DoD | Yahoo Finance | Capital IQ | SpaceNews

Jack Rebillard| 12/1/2023

Rating: Buy Current Price: $62.16 Price Target: $72.67 Company Updates ● P/E Ratio: 16.95 ● EPS: 3.77 ● Dividend Yield: 1.83% ● Equity Value: $15B - $16B ● Operating Margin: 15.5% Competitor Statistics from LTM 3Q 2023

LTM Revenue: $8.0B EBITDA Margin: 18.5% LMT EV/EBITDA: 10.8x

LTM Revenue: $10.0B EBITDA Margin: 20.8% LMT EV/EBITDA: 6.7x

LTM Revenue: $6.3B EBITDA Margin: 11.5% LMT EV/EBITDA: 4.8x

Masco Corporation (NYSE: MAS) Powering Homes, Powering Profits Investment Thesis:

Masco Corporation is a global leader in the design, manufacture, and distribution of branded home improvement and building products. The company’s portfolio of industry-leading brands includes Behr, Delta, Hansgrohe, Kichler, Liberty, and Hot Spring. My buy recommendation reflects a belief that Masco will continue to perform well, driven by its diversified portfolio of home improvement products, strategic acquisitions, and strong market position, making it a compelling buy for investors seeking short- to medium-term growth potential.

Valuation/Financial Modeling:

As of December 1st, Masco (MAS) is trading at $62.16. I believe that this equity is undervalued and can be expected to increase to $72.67 within the next year, implying 16.9% upside. I arrived at this conclusion by conducting a DCF analysis with modest revenue growth projection, a 13.0% operating margin in line with historical averages, and a WACC of 10.2% over 10 years.

Home Improvement Boom:

A significant driver of growth for the stock over the next year is the escalating demand for home improvement products and services. The housing market should continue its strong trajectory as consumers increasingly invest in home improvement. Masco’s diverse portfolio that covers the plumbing, cabinetry, and decorative product segments makes the firm primed to capitalize on this trend. Additionally, the company’s strategic focus on innovation, coupled with its demonstrated ability to cater to changing consumer tastes over time, positions it strongly to capture a large market share and drive revenue growth.

Global Expansion Initiatives:

Another interesting driver for stock growth could be Masco’s international expansion strategy. Recently, Masco has been actively pursuing opportunities to broaden its global footprint, tapping into new markets beyond its core American presence. With a keen eye on emerging economies, Masco aims to capitalize on the rising demand for quality home improvement products worldwide. By tailoring its offerings to diverse cultural preferences and expanding distribution networks, Masco should experience accelerated revenue growth and market penetration, therefore positioning itself as a leading global player in its industry.

Jack Rebillard| 12/1/2023

TTM Share Price Performance of Masco and Competitors

Source: Google Finance Risk Potential Raw Material Costs and Supply Chain Volatility: One notable risk for Masco stock in the upcoming

year is its susceptibility to raw material cost fluctuations and supply chain disruptions. As a company deeply entrenched in manufacturing home improvement products, Masco relies on raw materials like lumber, metal, and plastics. Any sudden or sustained increase in the prices of these commodities could potentially compress the firm’s profit margins, impacting the company’s bottom line. Moreover, general disruptions in the global supply chain, due to rising geopolitical tensions, new trade restrictions, or general logistical hindrances, could lead to delays in production and distribution, thereby hindering Masco’s ability to meet consumer demand and adversely affecting the firm’s financial performance and stock value.

Competition and Market Saturation: Another risk facing the company is heightened competition and

market saturation within the home improvement space. The sector is characterized by numerous players offering similar products and services, contributing to intense competition for market share. New entrants and existing competitors adopting aggressive pricing strategies, innovative product launches, or enhanced marketing campaigns could erode Masco’s market position. In this scenario, the firm might face challenges in maintaining pricing power or capturing new customers, potentially impacting revenue growth and profitability.

Evolution of Consumer Spending Trends: A third risk facing Masco in the coming year is potential

disruptions in consumer spending patterns or shifts in preferences within the home improvement sector. Changes in economic conditions could prompt consumers to reduce discretionary spending, including home renovation and non-essential home improvement products. Additionally, changing trends towards alternative home improvement solutions or DIY approaches could impact Masco’s demand levels. If the company fails to innovate according to changing consumer trends, they experience a decline in sales volume or struggle to sustain existing growth levels. Sources: Deloitte | Masco Corporation Investor Relations| CNBC.com | S&P Capital IQ | Yahoo Finance | The Wall Street Journal Statista | MarketWatch | Digital Trends | Google Finance | Masco Company Conference Presentation

Thomas Bailey| 11/25/2023

Rating: Buy Current Price: $5.65 Price Target: $7.41 Company Updates / News ● Market Cap: $69.04B ● Beta: 0.88 ● EPS: 4.28 ● PE Ratio: 6.9 ● 52 Week High: $7.37 ● 52 Week Low: $5.18 ● Glencore announces acquisition of Teck Resources Coal business for $9 billion ● Global coal demand rose by 1.5% during the 1st half of 2023 according to the IEA Competitor Statistics 2023 FQ2 LTM

Glencore Mining the Future Investment Thesis:

Glencore is one of the world’s largest natural resource companies producing and trading over 60 commodities across the globe. The company was founded in 1974 by Marc Rich as a commodity trading firm and has since vertically integrated several commodities. Today, Glencore is the largest supplier of cobalt and zinc in the world. The company is poised to benefit from the growing demand for sustainable energy, particularly due to the rising popularity of batteries. Glencore's profitability is closely linked to rare earth metals, which are crucial for this energy transition. My buy recommendation reflects optimism of the firm’s corporate strategy to shift to a focus away from coal towards commodities with exponentially increasing demand. Glencore plans to spin-off its coal business and list it on the New York Stock Exchange within 24 months of completing the recent acquisition of Teck Resources' coal unit.

Valuation/Financial Modeling:

As of November 25th, 2023, Glencore was trading at $5.65 per share with a market capitalization of $69 billion. I believe the firm is undervalued and will be trading at $7.41 with an equity value of $90 billion in the next 3 to 5 years. I conducted a comps analysis with a growth rate of 3.15% and selected the 25th percentile multiple of EV/ Revenue as several of the comparable public companies are in the growth stage with inflated equity values.

Recent Acquisition: EV/EBITDA: 6.15 Revenue: $52.45B

EV/EBITDA: 6.27 Revenue: $54.18B

Glencore recently announced its plans to purchase Teck Resources’ steelmaking coal unit for $9 billion along with other minority investors. Glencore will receive 77% of the business in a cash deal of $6.9 billion while Nippon Steel Corporation which already holds 2.5% will acquire another 20%. POSCO will exchange shares in Elk Valley Resources for a 3% share. Gary Nalge, CEO of Glencore, stated plans to demerge the coal units from the rest of the business and list the spinoff on the NYSE with secondary listings in Johannesburg and Canada within 24 months of completing the transaction, claiming, “there’s a potential value creation uplift for our shareholders to demerging coal.” This investment will allow Glencore to spin off its coal business which has historically amounted to over 50% of the firm’s revenue and focus on commodities that will fuel the energy transition such as cobalt and zinc.

ESG Effect: EV/EBITDA: 4.36 Revenue: $42.18B

Glencore generated just over $258 billion dollars of revenue during the fiscal year 2022. The firm reports its revenue in 4 categories, Metals and Mining and Energy Products, each with two subsections, marketing and industrials. As a whole, metals and mining comprised 35% of the firm’s total revenue with roughly 65% generated in the trading/marketing sector. On the other hand, trading makes up just under 80% of the total energy products revenue. As the transition to sustainable energy progresses, we will see this division approach a 50% split by 2040 as the energy products sector, coal and oil, will decrease as the demand for sustainable products such as cobalt and zinc increase.

Thomas Bailey| 11/25/2023

Glencore Stock Price vs. Materials Ind

Sources: S&P Capital IQ Risk Potential Mining Criticism Glencore and commodity companies in general have received criticism for the work environment in their mining operations. Glencore has made strides to ensure ethical standards are met and published both an Ethics and Compliance report and Modern Slavery Statement in 2022. The firm prioritizes making significant contributions to social development and environmental stewardship while minimizing negative impacts of their operations with the goal of supporting sustainable development across the globe.

Exchange Rate As a global company, Glencore is exposed to exchange rate fluctuations which can negatively impact the firm's profitability. Glencore converts each transaction to US dollars at the end of each fiscal year, which can both benefit or decrease the firm’s profitability. In 2022, Glencore reported an exchange loss of $307 million. The firm acknowledges this risk and hedges its currency exposure in an attempt to limit any downside effects but there is no assurance that such hedging will eliminate all adverse effects of currency fluctuations.

Geopolitical Climate Glencore operates across the world in several geographic regions and countries that are developing, complex, and have unstable political environments. Government policies, foreign investment, and price controls in these areas are constantly subject to change which can result in a material adverse effect on the firm’s ability to operate and generate profit. Sources:

Glencore.com/publications| Reuters | Yahoo Finance | Capital IQ

TELECOMMUNICATIONS

Alexa Cooper | December 4, 2023

Rating: Hold Current Price: $73.05 Price Target: $78.59 Company Metrics

● Market Cap: $3.201B ● Total Revenue: $797.7M ● Beta: 0.55 ● 52 Week High: $53.20 ● 52 Week Low: $78.80 Competitor Statistics from Latest Fiscal Year

EV/Revenue: 3.8x

EV/Revenue: 9.1x

Commvault Systems, Inc. (CVLT) Protecting Data, Unlocking Value Investment Thesis: Commvault Systems, Inc. (CVLT) is a data protection company intended to provide users with a secure platform for their data. The business operates across geographies serving customers through a software-as-a-service (SaaS) business model and has been traded on NASDAQ since their initial public offering in 2006. My hold recommendation reflects a belief that Commvault Systems has potential to grow significantly, but must improve their operating efficiencies to perform well in the future, due to their historical losses and market headwinds.

Valuation/Financial Modeling: As of November 27th 2023, Commvault is trading at $73.05. I believe that this equity is slightly undervalued and expected to increase to $78.59 within their next fiscal year. I arrived at this conclusion by conducting a DCF analysis with a 4.00% long term growth rate, 6.45% EBIT margin, and a WACC of 5.03% across a 5 year period. I forecasted these assumptions based on historical averages, incorporating the company’s announced future plans and economic gravity.

Commvault Cloud: Commvault announced a new product called Commvault Cloud, which is the first true cloud platform for Cyber Resilience in the Hybrid Enterprise. This platform incorporates AI capabilities to defeat cyber threats, offers the industry's first cleanroom recovery service, and unifies the company’s software offerings into one platform, increasing accessibility for users and driving growth.

Integrations: EV/Revenue: 5.7x

EV/Revenue: 2.5x

Commvault has partnered with other leading security and AI companies to protect users against cyber threats and attacks, including: Darktrace, Databricks, Entrust, and Trellix. According to a recent IDC study commissioned by Commvault, 61% of respondents believed that the likelihood of data loss within the next 12 months is "very likely." Commvault's strategic response of partnering with industry leaders will help drive their annual recurring revenue and net dollar retention rate, which are important metrics for growth based on their current subscription recognition method.

Alexa Cooper | December 4, 2023

Commvault vs Peers Monthly Share Price (YTD)

Source: S&P CapitalIQ Risk Potential Cybersecurity Industry Landscape: As the threat of cyber attacks is on the rise, data security companies are faced with the challenges of adapting to the continuously evolving landscape. As the industry operates with relatively low capital expenditure requirements, cyberspace is becoming an increasingly saturated market. Additionally, gaining customer trust is essential to business operations, which has led to a few key players dominating the data security industry.

Unsuccessful Efficiency Efforts: The current operating expenses of Commvault Systems are unsustainable for the future of the company. Commvault recently introduced a restructuring plan to increase company efficiency through cutting sales and marketing, general, and administrative expenses. However, high research and development expenses are required for the company to keep up with innovative data solutions. If Commvault is unable to continue to drive revenue growth while decreasing expenses, the company may face operational challenges to its current market position.

International Currency: Commvault is present in multiple geographic markets including North America, Europe, Latin America, and Asia. Each region has different regulatory restrictions, market conditions, and local competitors that can challenge the future performance of Commvault. Wages differences in technical professionals across geographies and unfavorable exchange rate conditions can negatively impact profit. Sources:

Raquel Kanner | December 2023

Rating: Hold Current Price: $604.56 Price Target: $588.25 Company Updates / News ● Market Cap: $275.31B ● Total Revenue: $18.88B ● PE Ratio: 54.27 ● Beta: 1.34 ● 52 Week High: $628.60 ● 52 Week Low: $318.60 Competitor Statistics from Q3 2023

Revenue: $14.8B

Revenue: $89.5B

Adobe (ADBE) Creativity for All Investment Thesis: Adobe, Inc. (ADBE) is a software company developing digital marketing and media solutions. The business operates in multiple segments, including Digital Media, Digital Experience, Publishing and Advertising. Adobe is one of the most diversified and largest software companies in the world, allowing for both small-scale and large-scale digital transformation through the multitude of service offerings. Since Adobe’s listing in the NASDAQ in 1986, the stock has grown 66.43% year-to-date and 7.30% in the past three months. My hold recommendation on Adobe is based on its potential as a digital transformation catalyst via its Digital Media and Digital Experience segments, and the competitive edge gained from integrating Generative AI into its products. However, risks such as competition in the Software-as-a-Service (SaaS) market, its high pricing model, and the widespread adoption of Generative AI by other companies should be considered.

Valuation/Financial Modeling: As of December 4th, Adobe, Inc. (ADBE) is trading at $604.56. I believe that this equity is slightly overvalued as of now and expected to decrease to $588.25 by the end of its fiscal year. I arrived at this conclusion by conducting a DCF analysis with a 2.2% long-term growth rate, 0.998 beta value, and a WACC of 7.1% across 5 years. I used these assumptions based on historical data and an optimistic view given Adobe’s performance history.

Industry-Standard Offerings:

Revenue: $56.5B

Revenue: $1.4B

Adobe's dominance in the market is largely attributed to its cloud-based subscription model, which contributed to 73% of its Q3 2023 revenue through its digital media segment, including Creative Cloud and Document Cloud products, at just $54.99 per month. An additional 25% of revenue came from its digital experience segment, focusing on enterprise marketing, commerce, and analytics services. This comprehensive cloud-based model, offering wide-ranging software applications across various industries, sets Adobe apart from competitors and fosters user loyalty due to its simplicity, compatibility, and effectiveness in delivering customer satisfaction.

Generative AI Developments: In Adobe’s recent release of Firefly Generative AI resources, users now have infinite possibilities to convert text to image, fill in missing areas of a graphic, add text effects, recolor images, and even create a 3D positioning of certain image elements. With that being said, the public availability to Firefly through Adobe’s subscription model has placed Adobe in a leading position in the booming AI market.

Raquel Kanner | December 2023

Adobe Versus Competitors

Source: Yahoo Finance Risk Potential Figma Acquisition: This ownership will result in harm to the larger product design software market and ultimately limits competition. If this acquisition does persist, the competition in offerings such as image editing, product design, and illustration will be incredibly limited and lead to pricing concerns. Possible solutions to combat this threat include prohibiting the acquisition in its entirety or lessen competition through divesting Adobe and Figma’s overlapping operations.

Intense Competition: Many of Adobe’s key competitors are other leaders in the SaaS Industry, where these rivals make use of their lower-cost product and service offerings to gain market share. As a result, Adobe is frequently faced with the threat of competitors that have the ability to lower their prices, offering aggressive pricing structures to clients. At large, while Adobe attempts to leverage its vast client base through its subscription model, it is undermined by companies that easily have the ability to provide technology solutions at a lower cost. Sources:

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Victoria Gong | 12/21/2023

Rating: Buy Current Price: $253.95 Price Target: $293.26 Company Updates Market cap: $62B Beta: 1.05 52-week low: $92.25 52-week high: $261.81 Competitor Statistics

from most recent quarterly reports

CrowdStrike Holdings (CRWD) Crowding out the Competition Investment Thesis: As businesses become increasingly digitized and geopolitical tensions run high, cybersecurity is front-of-of mind for both business owners and governments. CrowdStrike’s cloud-native Falcon platform uses the power of their customer base, the “crowd” to preventatively “strike” at incoming threats before they occur. My buy recommendation reflects a long-term belief in increasing cybersecurity investment. Additionally, CrowdStrike’s recent profitable quarter suggests strong momentum for margin expansion and positive profits in the coming fiscal year.

Valuation/Financial Modeling:

ARR: $3.15B Revenue: $786.0M

As of December 20, 2023, CrowdStrike Holdings (CRWD) traded at $253.95 at close. I believe CRWD is undervalued and could trade at $293.26 in the next 12 months. I conducted a DCF analysis assuming 35.6% topline growth rate consistent with FY 2024 Q3 results, a 50.1x EV/EBITDA exit multiple and 14.22% WACC across 5 years. Compared to competitors, CrowdStrike had the highest TEV/Revenue and Price/Revenue ratios. However, I believe that this valuation is justified due to the company’s stronger historic growth and street expectations of 14.98x PEG.

Bullish on cloud-native endpoint cybersecurity:

ARR: N/A Revenue: $1.88B

Endpoint security is crucial to defending against hackers using advanced techniques to infiltrate legacy systems. According to Frost & Sullivan, industry is projected to grow at an 16.8% CAGR over the next decade, with CrowdStrike leading as one of the top 3 market players with 13.8% market share by revenue. Moreover, the industry’s stickiness and customer loyalty suggests that current subscribers will continue to purchase add-ins. CrowdStrike has a proven track record of upselling existing customers, with 69% of customers buying 5 or more modules and 26% with 7 or more.

Expanding product suite expands TAM: ARR: $2.00B Revenue: $455.0M

On November 15, CrowdStrike announced CrowdStrike Falcon Go, a new AI cybersecurity solution for small and medium businesses (SMBs). With CrowdStrike’s recent release of Charlotte AI assistant, CrowdStrike continues to expand their AI threat detection strategies and also captures more of the market through different monetization strategies beyond pure subscription to now per-endpoint pricing, automating not just threat detection but the duties of security operations center (SOC) analyst, automating tedious work in helping users address cybersecurity incidents better.

Victoria Gong | 12/21/2023

CrowdStrike historical returns as compared to competitors

Source: Yahoo Finance Risk Potential High valuation fueled by macroeconomic tailwinds: CrowdStrike has one of the highest TEV/S and P/S multiples of its peer group, suggesting that investors believe that the company has high growth potential. However, it is an expensive valuation for a company just reaching profitability. With recent macroeconomic tailwinds, the share price has surged 50% since the November 4 Federal Reserve Board Meeting, while the S&P only rose around 30% and the Nasdaq Composite rose 20% in the same period. With the stock already grown by 149% YTD, and with market indices at historic highs and a beta of 1.05, CrowdStrike is highly susceptible to a market readjustment in the short-term.

Reliance on third party providers and channels: CrowdStrike relies significantly on Amazon Web Services and other data providers and 80% of revenue is acquired through channels apart from direct sales. This exposes CrowdStrike to significant risk if these contracts are not renewed.

Competition with cloud providers: Many public cloud providers come with their own cybersecurity services, and with CrowdStrike’s recent intention to penetrate the SMB customer base, they may be in a tough spot with business owners that have existing cloud subscriptions. In an industry with a high customer retention, CrowdStrike’s revenue growth may expand more slowly than projected. Sources:

Amy Ren | December 4th

Rating: Buy Current Price: $42.48 Price Target: $51.63 Company Updates ● Market Cap: $169.9B ● Shares Outstanding: $6.9B ● EPS: $3.60 ● P/E Ratio: 11.71 ● 52-Week Range: 33.78-47.46

Competitor Statistics from Q3 2023

Revenue: $14.7B

Subscribers: 10.3 M Revenue: $33.3 B

Comcast (CMCSA) Finding New Paths Investment Thesis: Comcast Corporation is a leading global media and technology company with a diversified business model that provides cable television, internet, and telecommunications services. The company’s strong competitive position, coupled with its ability to capitalize on emerging trends in the industry, makes it an attractive investment opportunity. The company’s internet services have seen strong growth in recent years, as it has continued to upgrade its network infrastructure to offer faster speeds and new services. My buy recommendation reflects supported by its strong balance sheet, with significant cash flow generation and a diversified revenue stream that provides stability even in times of economic uncertainty.

Valuation/Financial Modeling: As of December 2nd, Comcast (CMCSA) is trading at $42.48. I believe that this equity is undervalued and expected to increase to $51.63 within this year. I arrived at this conclusion by conducting a DCF analysis with a growth rate of 5% over five years, an operating profit margin of 20%, and a weighted average cost of capital (WACC) of 9%. I used these assumptions based on historical data and an optimistic view given Comcast’s performance history.

Xfinity: Comcast offers core products such as high-speed internet access, cable television, and voice services, which fulfill consumers’ fundamental needs and provide a stable foundation for the company’s sustained growth. Recently, Comcast introduced a range of innovative products and services, including Xfinity Mobile and Xfinity Flex. These new products not only increase the company’s revenue streams but also enhance customer retention and satisfaction, laying a solid foundation for future growth. In addition, Comcast is committed to technological innovation and research and development, investing in next-generation network technologies, cloud computing, big data, and more. The continued application and innovation of these technologies will contribute to driving the company’s future stock price growth.

Acquisitions: Subscribers: 222.84M Revenue: $42.8B

In 2023, Comcast saw total assets increase from $257.3 billion to $261.1 billion, a 2.66% increase year to year, reflecting a stable rising trend in wireless service and theme parks after COVID-19’s impact. T-Mobile also reported a 30.1B revenue and $4B FCF, which shows a strong balance sheet performance and customer retention. On December 1, 2023, Walt Disney concluded its acquisition of Comcast’s $8.6 billion stake in Hulu. The agreement is established in 2019, and Hulu projects to have a higher valuation than previously. It also indicates Comcast’s shift in control in this popular streaming service.

Amy Ren | December 4th

Stock Price Growth with Competitors:

Source: Yahoo Finance Risk Potential Market Competition: The broadcast television and broadband network industry where Comcast operates is highly competitive, with other cable television operators, online streaming service providers, and emerging tech companies vying for market share. Failure to keep pace with market changes could lead to user and market share loss for Comcast. Despite the success of its streaming platform Peacock in terms of AD revenue, Peacock has a relatively limited number of users compared to its industry competitors. Comcast is working hard to further develop Peacock, particularly in the areas of software/streaming applications and video games. However, as the pursuit of profit margins and investment in content production may involve the risk of losing a limited number of subscribers, Comcast is likely to be cautious about raising prices.

Content Copyright Concerns: As Comcast increasingly ventures into the streaming entertainment sector, copyright issues could pose a risk. Mishandling or negligence in addressing copyright issues could lead to legal disputes and fines, negatively impacting the company’s reputation and operations.

Data Security Risk: Xfinity reports unauthorized access to its internal system in mid-October, indicating Comcast’s potential vulnerabilities in network regulation. The telecommunications industry is subject to various data protection measures. In other words, Comcast’s failure to comply with these regulations could result in some legal consequences and penalties.

Alia Piccinni | November 2023

Rating: Hold Current Price: $369.85 Price Target: $256.50 Company Updates / News • Market Cap: $2.814T • Beta: 0.88 • In August 2023, Microsoft announced new security innovations that expand multicloud visibility and enhance multiplatform protection as cloud-based cyber-attacks grow by 48% YoY. • In November 2023, CEO Sam Altman resigned from OpenAI and was quickly hired to lead an innovation research team at MSFT. Days after, Altman and the new initial board reached an agreement for him to return as CEO of OpenAI. Competitor Statistics from 2023

Stock Price: $186.69 Market Cap: $2.964T

Microsoft Corp. (MSFT) A Leader in the New AI Era Investment Thesis:

Founded in 1975 by Bill Gates and Paul Allen, Microsoft Corp. (MSFT) is an American multinational technology corporation. It ranked No. 14 in the 2022 Fortune 500 ranking of the largest United States corporations by total revenue and was the world’s largest software maker by revenue as of 2022. MSFT is best known for their Windows line of operating systems, the Microsoft 365 suite of productivity applications, and the Edge web browser. Their flagship hardware products include the Xbox video game consoles and the Microsoft Surface lineup of touchscreen personal computers. My hold recommendation reflects a belief that although the target price is below the current price, MSFT’s reputation and dominance in the technology space positions them well to continue their proven success.

Valuation/Financial Modeling:

As of November 17, 2023, Microsoft (MSFT) is trading at $369.85. I believe that this equity is overvalued and to decrease to $256.50 within this year. I arrived at this conclusion by conducting a DCF with 4% growth rate and a 9.2% WACC.

Office AI Copilot 365:

In January 2023, MSFT announced a $10B investment in OpenAI and since then has made efforts to infuse generative AI into its software and services. On September 26, 2023, the company launched Microsoft Copilot 365, an everyday AI companion. This new feature is predicted to generate $10B by 2026. Copilot leverages the web, work data and an individual in the moment PC activity to provide assistance while putting privacy and security at the forefront. Over time, Microsoft plans to add capabilities and connections to Copilot across their most-used applications. This marks a significant advancement towards their vision of having one experience that works across a user’s entire life.

New Deals:

Stock Price: $64.12 Market Cap: $19.905B

On October 13, 2023, MSFT completed its $69B purchase of Activision Blizzard. This acquisition brings popular game franchises including “Call of Duty,” “Candy Crush,” and “World of Warcraft” to MSFT. MSFT CEO believes that gaming is one space they have a real contribution to make in consumer markets especially as the way games are made and delivered are changing drastically. With Activision Blizzard, MSFT can be one of the largest gaming publishers and producers.

Alia Piccinni | November 2023

Microsoft’s Total Revenue Growth

Source: Capital IQ Risk Potential Service Disruptions: In their 2023 Annual Report, MSFT warns of service disruptions if they are unable to get enough AI chips for data centers. Graphic processing units (GPUs) are a critical raw material for MSFT’s fastgrowing cloud business. There is growing demand at top tech companies for this hardware that is key to providing AI capabilities to smaller businesses. They believe there is a risk of GPU outages if they can’t get the infrastructure it needs. This potential risk is noted multiple times in their regulatory filing, however such language has yet to appear in recent annual reports from MSFT’s large tech companies including Apple, Amazon, and Meta.

Software Vulnerabilities: MSFT has an empire of hardware and software; however, this poses a target-rich

ecosystem for a wide range of bugs and many vulnerable organizations and users. Qualys, an IT security and compliance platform found that 15 of the 20 most-exploited software vulnerabilities it has observed are in MSFT’s code. These vulnerabilities pose risk as they can infect victims' systems with ransomware, alter or steal data, and remotely spread malware or takeover devices. This would greatly tarnish MSTS’s reputation as a top technology provider, especially as reliance on technology grows.

Competition & Low Barriers to Entry: MSFT faces significant competition from firms that provide

competing platforms for free. Many of MSFT services and products are available to consumers at a price. Meanwhile, many competitors offer comparable free applications, online services, and content to consumers, which compete directly with MSFT’s revenue-generating products. These competitive pressures may cause decreased sales volumes, price reductions, and/or increased operating costs, such as for research and development, marketing, and sales incentives and lead to lower revenue, gross margins, and operating income. However, it is important to note that the impact of this risk may only be slight for MSFT because they have such a large scale and generate revenue beyond their revenue-generating digital services. Sources:

HEALTHCARE

Julian Bement| 11/15/2023

Rating: Hold Current Price: $175.19 Price Target: $170.21 Company Updates / News ● Market Cap: $79.266B ● Beta: 0.82 ● EPS: 4.91 ● PE Ratio: 35.16 ● 52 Week High: $194.99 ● 52 Week Low: $140.76 ● $1 billion dollar investment to improve manufacturing for Librela medication ● The petcare industry is thriving with a 7.4% compound annual growth rate Competitor Statistics from Q3 2023

Zoetis (NYSE:ZTS) Expanding Markets Investment Thesis:

Zoetis is a leading entity in the animal health pharmaceutical Industry. It produces over 300 products ranging from vaccines, parasite prevention solutions, feed additives, and lab diagnostic products. These products are widely used in veterinary hospitals spanning the United States and more than 100 other countries. Since its separation from Pfizer in 2013, Zoetis has risen as a leader in pharmaceuticals, after becoming the first fortune 500 animal healthcare company in the world. Notably, its performance has exceeded the S&P 500 by more than threefold over the past decade. This large growth is aligned with the expansion of the pet care industry in the United states. Projections anticipate a significant increase in pet-related spending, reaching an estimated $143 billion by the end of 2023, compared to $90.8 just five years ago. Given its current momentum and the thriving nature of the industry, I recommended a short-term hold through the fourth quarter and into next year, as Zoetis focuses on long-term growth in this thriving industry.

Valuation

As of November 15th, 2023, Zoetis was trading at $175.19 per share. I believe that this is slightly overvalued with a slight decrease to $170.21. This evaluation was arrived at using a Discounted Cash Flow with a terminal growth rate of 2.0% and weighted average cost of capital of 8.77% across a 10 year period. These assumptions are based on Zoetis’s historical growth rate and an optimistic viewpoint of Zoetis’s future performance in the growing animal healthcare market.

Expansion:

EV/EBITDA: 23.38 Revenue: $2.2B

In October, the company announced a $1 billion investment in manufacturing, to improve the capacity for producing monoclonal antibodies. This is the largest investment in company history. These antibodies are used in the medication Librela for treatment of arthritis in dogs and cats. This investment allows Zoetis to meet the recurring nature of this disease as pet owners continue to take better care of their animals with advanced technology. During the pandemic, pet adoptions increased by 250%. This large investment by Zoetis is set to meet this demand increase for the long term as arthritis in dogs and cats is typically seen in their later years of life. Also with this large increase in adoptions, the petcare market is expected to grow 5% annually and the vaccine market is expected to grow 9% annually.

Product Breakdown: EV/EBITDA: 23.13 Revenue: $15.96B

EV/EBITDA: 35.79 Revenue: $0.915B

Zoetis has products in the 7 categories of healthcare. These categories include vaccines, parasiticides, anti-infectives, dermatology, other pharmaceutical products, medicated feed additives and animal health diagnostics. They generated $8.1 billion in annual revenue with ⅔ of this coming from the companion animal industry (cats, dogs, fish) and ⅓ coming from the farm animal industry (cattle, swine, horses). All of this revenue is generated from the animal care industry. This is unique to its major competitors such as Merck. and Bohringer Ingleim which are general pharmaceutical companies with animal health accounting for 12% and 15% of their respective revenues.

Julian Bement| 11/15/2023

Zoetis vs Merck Monthly Share Price (YTD)

Source: S&P Capital IQ Risk Potential Investment Uncertainty

Regarding the $1 billion investment in monoclonal antibody manufacturing, the key risk lies in the possibility that this sizable financial endeavor might not produce the anticipated positive impact as envisioned by the management. This implies that future demand may fall short of their expectations. Despite my confidence in these forecasts, it's important to remain aware of this potential risk.

Market Uncertainty:

As spending on the petcare industry has increased over 100% in the past decade, it is possible that this immense growth will plateau in the next few years. With the large spike of pet ownership in the pandemic era, spending on initial vaccines such as distemper and rabies vaccines may see a slight decrease as these animals enter their middle to later years of life. There is also uncertainty in spending on treatments for diseases such as arthritis as it is case dependent on the owner's current financial situation. These medications aid in the quality of life for companion animals but are not required for ownership like distemper and rabies vaccines are.

Julian Dahl | November 29, 2023

Align Technology (ALGN) Orthodontic Solutions

Rating: Hold Current Price: $214.14 Price Target: $210.06 Company Updates/News

Investment Thesis:

Align technology is an American company focused on 3D dental imaging and is best known for its staple Invisalign orthodontics products. It was founded in 1997 in ● Market Capitalization: Tempe, Arizona by Zia Chishti and Kelsey Wirth and went public on January 26, $14.6 B 2001 under the ticker symbol ALGN. The stock was initially listed at 13$ and ● P/E Ratio: 45.42 10,000,000 shares were issued. The company’s underlying mission is to innovate and ● EPS: 1.58 ● 52 week high: 413.20 (July, reshape the healthcare industry, specifically the dental care industry. My recommendation to hold comes from Align technology’s stalled earnings and 2023) lowered EPS, and a comparative analysis of firms such as Straumann Group, Envista ● 52 week low: 176.34 (November, 2023) Holdings, Henry Schein, 3M Company and Dentsply Sirona, all competitors in the ● Align’s stock saw a 23% orthodontics/dental space. drop in a single day after an earnings call indicated Valuation: a weak quarter that ended As of November 29, Align Technology (ALGN) shares are trading at $214.14. I in October. believe that this equity is overvalued and expected to decrease to $210.06 within the year. I arrived at this conclusion by conducting a Comparable Company Analysis, Competitor Statistics from Q3 2023 comparing Straumann Group, Envista Holdings, Henry Schein, 3M Company and Dentsply Sirona and using the P/E valuation multiples. Furthermore, the Comparable Company analysis and the 52 week high/lows reveal the volatility of this market and its subjectivity to market shifts. However, within this market, Align’s EBITDA margins prove to be higher than many of its competitors. Revenue: $2.65 B

Revenue: $3.94 B

Products and Proprietary Technology:

Align Technology is best known for its Invisalign system which uses a series of removable clear aligners to straighten teeth. These aligners are made for each patient using 3D imaging technology. In addition to Invisalign, Align Technology also offers the iTero scanner, a digital scanning system that dentists use to create 3D models of a patient’s teeth and gums. The company focuses on dental solutions that provide an alternative to dental treatment, controls traditional roots and enhances overall dental experience.

Effects of Management: Revenue: $12.69 B

Revenue: $2.57 B

Align technology’s CEO Joseph Hogan took over the position in 2015. Since this change in leadership, Align has seen its largest growth in Market Cap since its IPO in 2001. Under his leadership in 2021, the stock reached its peak price of $721.5. However, in recent years the stock has continued to fluctuate causing uncertainty for long-term investors.

Julian Dahl | November 29, 2023

Align Technology Worldwide Market:

Source: Business Quant Risk Potential Market Outlook: Align Technology has demonstrated strong financial stability, with cash reserves and

manageable debt levels. This has laid a solid groundwork for their sustained growth, encompassing research, development, and expansion to foreign markets. Align Technology has effectively entered markets outside of the United States and has broadened its global presence in the dental industry, specifically in Europe. By actively engaging dental professionals and patients on a worldwide scale, the company has increased market share within the orthodontic industry. Align Technology's commitment to creating aesthetically pleasing orthodontic solutions like the Invisalign system aligns with consumers' growing preference for inconspicuous yet effective dental treatments. The increasing demand for transparent aligners among both adults and teenagers further fuels the company's upward trajectory as it continues to meet consumer demands. However, Align technology and other companies in the dental industry tend to be subject to stock price volatility due to variable demand for dental products, especially in times of economic recession. In the years following 2021, Align’s revenue has decreased, yet the graph’s trend shows a promising future of global market share. Sources: Align Technology | Macrotrends | Google Finance | Yahoo Finance | Business Quant | Capital IQ | SpaceNews

Kaitlyn Lau | 01/15/24 Rating: Buy Current Price: $20.87 Price Target: $34.28 Company Updates / News • • •

•

Market Cap: $3.46 billion Diluted EPS: -24.46 In early January 2024, Teladoc announced that it is continuing to grow its virtual mental health platform, BetterHelp, through targeting the B2B market. In July 2023, Teladoc doubled down on its two-year partnership with Microsoft to integrate AI and clinical documentation technology into its Solo virtual care platform.

Competitor Statistics As of 1/15/2024

Stock Price: $20.87 Market Cap: $3.46B

Stock Price: $27.02 Market Cap: $818M

Stock Price: $31.48 Market Cap: $3.62B

Teladoc Health Inc. (TDOC) Investment Thesis: Teladoc Health operates as the global leader in virtual healthcare services. It operates in two segments: Integrated Care and BetterHelp. Integrated Care encapsulates the company’s virtual medical services while BetterHelp includes its online counseling and therapy services. My buy recommendation reflects my belief that Teladoc is poised for a strong year of growth due to its successful development of BetterHelp and increased investment into AI. Valuation: As of January 15, Teladoc Health (TDOC) is trading at $20.87. I believe that this equity is currently undervalued and expected to increase to $34.28 within this year. I arrived at this conclusion by conducting a comparable companies analysis. I chose to give Teladoc a buy rating based off historical data and an optimistic view given the company’s strong growth potential. The Success and Continued Growth of BetterHelp: After the COVID-19 pandemic, there has been greater attention towards taking care of mental health. Since BetterHelp’s business model focuses on directly connecting with consumers, the platform gained many new users. BetterHelp also provides a cheaper alternative to traditional care, which increases its outreach and accessibility. The platform has been a massive success for Teladoc; it grew from $100 million to $1 billion in revenue in the past three years. Even though there have been questions over whether BetterHelp will continue to boost Teladoc’s growth, the company has been looking at expanding BetterHelp’s services. For instance, the company announced just last week that it was looking to bring BetterHelp more into the B2B side of its business by selling it directly to employers and organizations. Due to BetterHelp’s strong clinician network and quality care models, expanding into B2B could bring a lot of additional revenue for Teladoc. Increased Investment into Artificial Intelligence: Teladoc is constantly evolving its platform to establish itself as the global leader of the telehealth industry. As the demand for virtual healthcare services grows, Teladoc has shifted its focus towards improving the efficiency of its platform by aiming to increase its technological capabilities. Now that Teladoc has been performing stronger financially in 2023, it has begun investing more heavily into artificial intelligence (AI). The company collaborated with Microsoft in mid-2023 to bring voice recognition capabilities into its virtual care solutions to minimize the administrative burden put on clinical workers. Furthermore, Teladoc uses around 60 of its own AI models to improve other aspects of its business. I believe that investing in AI further is a beneficial move for Teladoc as it will continue to improve the platform’s efficiency and revenues.

Volume

5 0 1/17/2023

Stock Price

Millions

Kaitlyn Lau | 01/15/24 Teladoc Health OHLC and Stock Volume Over the Last Year

4/17/2023

7/17/2023

10/17/2023

Date

Source: Yahoo Finance Risk Potential Uncertain Financials: Teladoc’s stock has suffered greatly in the last few years due to its troublesome acquisition of the chronic care company Livongo in 2020. The company ended up incurring billions in impairment charges, which led to a net loss of $13.7 billion in 2022. However, it is important to note that Teladoc has shown stronger financials in 2023. This was mainly due to its mental health service BetterHelp, which brought in over $1 billion in revenue for the company in the last year. Even still, Teladoc is having issues meeting investors' expectations, which makes its financial future difficult to decipher even with increasing growth in the telehealth sector. Increasing Competition in the Telehealth Space: Even though Teladoc is the nation’s first and largest telehealth provider, there is increasing competition in the industry from non-traditional competitors such as technology giants like Amazon. Amazon recently launched its own telehealth service called Amazon Clinic in August 2023 through its acquisition of One Medical. Due to the company’s immense technological capabilities and strong brand image, it has an advantage over Teladoc in terms of its platform efficiency and customer acquisition rate. Therefore, Teladoc must continue to innovate and improve its services in order to maintain its leadership in the telehealth sector. Higher Cost of Labor Amidst a Healthcare Worker Shortage: Due to an aging population and the repercussions of the COVID-19 pandemic, there has been a labor shortage in the healthcare industry. To attract more workers, healthcare payrolls rose at a 4.2% annualized rate in the three months through October 2023, up from a 3.1% pace in the first quarter of 2023. For Teladoc to expand its services and take on more clients, it must maintain a widespread provider network. Therefore, investors should keep in mind that Teladoc will have to keep up with the higher cost of labor in the healthcare industry to attract more care providers. This may hurt the company’s short-term earnings.

CONSUMER & RETAIL

Julia Park | December 13, 2023

Rating: Buy Current Price: $91.89 Price Target: $101.78 Company Updates / News • Market Cap: $102.5B • Beta: 0.88 • EPS: 3.54 • PE Ratio: 25.15 • 52 Week High: $93.78 • 52 Week Low: $72.92 Competitor Statistics from Q3 2023

EV/EBITDA: 1.79 B Revenue: $13.27 B

EV/EBITDA: 652.55 M Revenue: $4.92 B

TJX Companies Inc (TJX) Retail’s Hidden Gem Investment Thesis:

TJX Companies Inc was founded in 1976 as a new off-price chain selling family apparel and home fashions. TJX continued to grow steadily over the years, now operating T.J. Maxx, Marshalls, HomeGoods, Sierra, and Homesense, as well as six e-commerce sites and over 4,800 stores across 9 countries. TJX Companies Inc can attract price-conscious consumers, as their business model is built off the concept of offering higher quality clothing at lower prices - making them an excellent fit for today’s macro environment. My buy recommendation reflects a belief that TJX Companies Inc will continue to perform well and is well-positioned for the future.

Valuation/Financial Modeling:

As of December 13th, TJX Companies Inc (TJX) is trading at $91.89. I believe that this equity is undervalued and expected to increase to $101.78 within this year. I arrived at this conclusion by conducting a comparable company analysis. I used these assumptions based off historical data and an optimistic view given TJX’s performance history.

Marmaxx (U.S.):

TJX has been able to sustain a competitive advantage despite a growing number of low-cost retail outlets through their ability to consistently deliver value at a large scale. Customer traffic has remained the key driver behind comparable store sales growth, especially seen in their Marmaxx (U.S.) segment. Marmaxx’s net sales have increased 9% year-over-year to $8,107 million in the third-quarter fiscal 2024, compared to a 7% growth in comparable store sales. Marmaxx’s consistent strength is expected to be a key driver of the company’s overall sales in the quarters ahead.

Overview:

Despite uncertainty serving as the dominant theme of the 2023 economic landscape, consumer spending has managed to maintain a positive outlook. Consumer spending has persisted in the face of rising interest and inflation rates demonstrate how it is an indispensable sector. With costs of food and energy rising, TJX can appeal to price-conscious working-class, middle-class consumers, and even higher end shoppers who want to cut expenses without sacrificing quality. EV/EBITDA: 2.04 B Revenue: $25.40 B

Furthermore, TJX Companies is in a strong financial position, reporting better than expected fiscal fourth quarter sales of $14.5 billion - an increase of 5% from the previous year. TJX has demonstrated their ability to capitalize on the current state of the consumer retail market.

Julia Park | December 13, 2023

TJX Companies Inc 5-Year Stock Price:

Source: Yahoo Finance Risk Potential Global Supply Chain Reliance and Real Estate Leasing: TJX has faced supply issues resulting in increased operating expenses due to higher freight transportation costs. Additionally, as inflation has risen, renting properties has become more expensive, adding to their operating costs. Though the inflation and interest rates are stabilizing, this is something to keep an eye on for the future. Market Concentration: TJX is consolidated in the U.S. despite having stores across the globe. Dependence on

the US could affect the company’s operational and financial performance and increases its business risks by exposing it to the economic and geopolitical risks associated with the country.

Cybersecurity Threats: TJX has shifted to an increased online presence to keep pace with the growing e-

commerce industry. However, this increases their dependence on technology systems and infrastructure, which increases the risk of potential vulnerabilities form breakdowns due to system malfunctions, unauthorized access, power loss, human error, and more.

Sources:

Emiri Fukuchi| 11/10/2023

Rating: Sell Current Price: $1.74 Price Target: $1.07 Company Updates ● Market Cap: 1.49B ● PE Ratio: 19.15 ● 52 Week High: $7.10 ● 52 Week Low: $1.34

Olaplex Holdings Inc. (OLPX) Untangling Strands of Concern Investment Thesis: Olaple’s strong history of innovation within the hair care industry has allowed the company to grow tremendously and puts the company in a successful competitive position in the booming beauty industry. My sell recommendation is based on Olaplex’s performance in FY 2023 compared to FY 2022 which reflects a decline in performance.

Valuation/Financial Modeling:

Competitor Statistics from Q3 2023

Revenue: $123.6M

As of November 10th, Olaplex (OLPX) is trading at $1.74. I believe that this equity is overvalued and expected to decrease to $1.07 within this year. I arrived at this conclusion by conducting a DCF analysis with financial data gathered from historical data.

Bond Building Technology: Olaplex’s popularity is primarily gained from the bond-building technology that they have patented. This technology, which works to repair hair at the molecular level, has proven to show results on damaged hair. Many consumers rely on Olaplex to maintain their healthy hair and this has helped Olaplex build a loyal customer base. Olaplex is a leading competitor within the hair market due to this technology and overall popularity. They have a multiple-step process that is curated for optimal results which successfully encourages the purchase of multiple products.

Overview: Revenue: $931M

In Q3 2023 Olaplex’s Net Income was $20.4M, compared to $60.8M in Q3 2022. Their adjusted EBITDA also decreased from $102M to $52.5M. Additionally, their gross profit margin decreased from 73.6% to 67.6%. Olaplex is adjusting its marketing strategy, including educational content that speaks to the science of its products and reasserting its positioning with professionals and specialty retail partners.

Revenue: $3.75B

Emiri Fukuchi| 11/10/2023

Olaplex’s Stock Price Compared to Competitors Sally Beauty and Estee Lauder

Source: Yahoo Finance Risk Potential Affordable Alternatives: Because of Olaplex’s higher price point, there have been more affordable alternatives that consumers choose over Olaplex products. Especially with the popularity of sharing these alternatives on social media platforms such as TikTok, there is a risk of Olaplex’s sales decreasing with users switching.

Misinformation: With social media users using and reviewing Olaplex products, misinformation, especially regarding Olaplex’s bond-building technology, can be spread. Misinformation can cause sales to decrease as users are dissuaded from purchasing products. This risk is currently trying to be mitigated by the company by its active efforts to correct misinformation.

Lawsuit: Olaplex faced a lawsuit in 2023 with numerous women claiming that their hair was damaged when using Olaplex products. This lawsuit has caused negative publicity for the company and consumers may have been discouraged to purchase products, which can cause a decrease in sales.

Sources:

Gerald Yavorsky | 11/19/2023

Rating: Buy Current Price: $422.44 Price Target: $455.49 Company Updates

Lululemon Athletica Inc. (LULU) Investment Thesis: Since Lululemon’s listing on the NASDAQ in July 2007, the stock has grown more than 2300%. Even further, with continuing strong performance and growth, Lululemon was inducted into the S&P 500 in October 2023.

● Lululemon becomes Peloton’s primary apparel partner ● Market Cap: $53.49 B ● LTM Range: $286.57 - $437.06 ● TTM EPS: $11.36 ● LTM EBITDA: $2.29 B ● LTM Net Income: $1.01 B ● Profit Margin: 11.40% ● Beta (5Y Monthly): 1.34 ● Shares Outstanding: 121.42 M

My recommendation reflects a belief that Lululemon will continue to perform, given the partnership with Peloton and increasing revenue and store growth.

Competitor Statistics

Peloton Partnership:

from LTM

P/E Ratio: 37.19 Revenue: $8.84 B

Valuation/Financial Modeling: As of November 19th, LULU is trading at $422.44. This equity is expected to increase slightly to $455.49 within the year. I conducted a DCF analysis with a WACC of 11.93% and EV/EBITDA multiple of 19.0x, slightly higher than the median multiple of Lululemon’s competitors. I used these assumptions based on historical data and an optimistic view given Lululemon’s performance history and extremely successful brand image. On September 27th, Lululemon and Peloton announced a five-year strategic global partnership through which Peloton will become the exclusive digital fitness content provider for Lululemon, and Lululemon will become the primary athletic apparel partner to Peloton. This will allow both companies to cross-sell their products to over 20 million committed members and guests. Together, the brands will engage their global community of members through new technical apparel, experiences, special programming, and original content, which will expand brand awareness and reach of both companies.

Overview:

P/E Ratio: 28.10 Revenue: $9.13 B

P/E Ratio: 8.11 Revenue: $5.86 B

Lululemon Athletica sells technical athletic apparel, offering an assortment of pants, shorts, tops, and jackets designed for a healthy lifestyle and athletic activities such as yoga, running, training, and more. The company has 672 stores in 18 countries as of July 2023. This number continues to grow, as the brand had 655 stores up to January 2023, 574 up to January 2022, and 521 up to January 2021. Overall, the company raised full-year 2023 revenue up to $9.51-$9.57 billion from an earlier estimate of $9.44-$9.51 billion. The market for technical athletic apparel is highly competitive, and Lululemon competes with established players such as NIKE Inc., Adidas AG, and Under Armour Inc. However, Lululemon has unique positioning with three key priorities to drive revenue growth from their loyal customers: product innovation, omni guest experiences, and market expansion. The company has started investing more in products for men, as well as products into the office, travel, and commute categories. They are also planning on digital integration, updating their loyalty program, and continuing to invest in experimental offerings such as the launch of a yoga studio in the Chicago store.

Gerald Yavorsky | 11/19/2023

Lululemon’s Stock Growth Outperforms Its Competitors over the Last Year

Source: CapitalIQ Risk Potential Global Supply Chain Reliance: Lululemon relies on suppliers and manufacturers mainly located in the Asia Pacific region. Approximately 40% of products were manufactured in Vietnam in 2022, 14% in Cambodia, and 12% in Sri Lanka. In 2022, approximately 43% of the fabric used in products was sourced from Taiwan, and 20% was from China. Disruption of supply chain capabilities due to trade restrictions, political instability, natural disasters, public health crises, war, or labor supply shortages could hurt Lululemon’s ability to produce and distribute their products. Interest Rate Risk: Lululemon has a revolving credit facility that provides up to $400 million of available borrowing. The company’s borrowing is based on a variable rate, and because of this, there is exposure to market risks relating to changes in interest rates if there is a large outstanding balance. In July 2023, the Federal Reserve raised the federal funds rate to 5.25-5.50%, the highest rate since 2001. Extended periods of high interest rates could hurt borrowing capacity. Falling into ‘Fast Fashion’: While Lululemon tries to separate itself from fast fashion with promises of environmentally and health-conscious promises and a higher-end feel, consumers may feel that the company’s offering fits in with retailers such as Uniqlo, Zara, or H&M, but at a higher price point. The company stated that they will make progress towards using more renewable fabrics, but no tangible actions have been taken yet. Lululemon should continue to emphasize that their products are ‘casual luxury’ rather than ‘fast fashion’ to prevent clouding positioning. Sources: Lululemon Investor Relations | Forbes | CFRA Equity Research | Yahoo Finance | Bloomberg | Capital IQ | Financial Times| Medium| Reuters

Kristian Suh | 11/28/2023

Rating: Buy Current Price: $70.86 Price Target: $80.12 Company Updates / News ● Market Cap: $15.36B ● PE Ratio: 12.73 ● Best Buy Embraces Digital Experiences With New Small-Format Store ● Best Buy (BBY) Q3 Earnings Beat Estimates, Sales View Down ● Best Buy scales back sales outlook as results top expectations Competitor Statistics from Q3 2023

Best Buy (BBY) Reimagining Retail Investment Thesis: Best Buy is a multinational consumer electronics company with more than 1,148 stores worldwide. Best Buy offers a variety of products both through its stores and website, including consumer electronics, office products, home appliances, software and more. Furthermore, Best Buy operates several subsidiary services such as Geek Squad which provides specialized tech support and assistance. Best Buy melds its consumer retail services, offering a one-stop all experience for all electronic, tech, and various other needs. My buy recommendation reflects my belief that Best Buy will perform well in the long-term due to favorable macroeconomic trends and Best Buy’s adapting and flexible retail business model.

Valuation/Financial Modeling: As of November 28, Best Buy is trading at $70.86. I believe that this equity is undervalued and expected to increase to $80.12 within the next twelve months. I arrived at this conclusion by conducting a comparable company analysis with other companies similar to Best Buy such as Costco and Target. I used these assumptions based on historical data and an optimistic view given Best Buy’s performance history and growth opportunities in the retail sector.

Changing Retail Space: Revenue: $242.29B Market Cap: $263.61B

Revenue: $109.1B Market Cap: $133.81B

Revenue: $9.795B Market Cap: $20.83B

With the rise in e-commerce and the shift away from the purchase of consumer goods at physical stores, Best Buy has begun remodeling its business model around the retail space that it operates. In 2023, Best Buy closed 18 large format stores while implementing eight Experience store remodels. The new Experience store differs from Best Buy’s traditional outlets as it’s designed to showcase new products, help customers with technical support and other consultation needs, and leverage its retail space to facilitate the pick-up and logistics of online orders. This remodel initiative has led to fewer but more efficient stores, significantly boosting eCommerce efficiency. In the fiscal year of 2023 alone, Best Buy’s eCommerce sales accounted for 33% of its domestic revenues compared to only 19% in 2020.

Kristian Suh | 11/28/2023

Stock Price Change for BBY, TGT, COST (November 28th, 2022-2023):

Source: Yahoo Finance Expected Pandemic Rebound: Over the last two fiscal years, Best Buy has experienced a significant drop in digital and electronic sales. In Q2 of fiscal 2023, online sales fell by 7.1% and comparable sales by 6.3%. This decline is linked to the surge in eCommerce during the COVID-19 pandemic, as consumers had already stocked up on electronics. However, the post-pandemic trend of declining electronic sales is expected to rebound after the 2023 fiscal year. According to CEO Corrie Barry, 2023 was “the low point in demand after two years of sales declines” and that in 2024, “the consumer electronics industry should see stabilization and possibly growth driven by the natural upgrade and replacement cycles and the normalization of tech innovation.” This outlook is shared by analysts and industry leaders, like Mark Essayian of KME Systems, who foresee a rise in hardware replacements as COVID-era devices age and inflation stabilizes.

Fierce Competition: With online sales making up an increasingly significant amount of Best Buy’s total revenue, Best Buy finds itself in fierce competition with other established eCommerce giants such as Amazon. Amazon accounts for nearly 38% of all eCommerce spending in the United States and its continuous horizontal and vertical expansion threatens Best Buy and other retail corporations looking to expand in the eCommerce space.

Lack of Diversification: Best Buy’s primary focus is selling electronic goods and digital services. While the recent decline in consumer demand for such goods and services is expected to rebound in the near future, the lack of diversification in Best Buy’s products leaves it vulnerable to wider market dynamics and consumer trends. As the future demand of electronic goods and digital services remains volatile especially post pandemic, Best Buy must continue to diversify its business models and services to ensure that it is able to weather out potential market fluctuations and changing consumer demands. Sources: McKinsey & Company | Barrons | CFRA Equity Research | Wall Street Journal | Yahoo Finance |Forbes | Bloomberg | Capital IQ | Financial Times

FINANCIALS

Khanh Nguyen | 11/23/2023

Rating: Hold Current Price: $32.57 Price Target: $35.25 Company Updates ● 52-Week High: $38.32 ● 52-Week Low: $25.20 ● Market Cap: $11.751B ● Shares Outstanding: 360.8M ● PE Ratio: 56.16 ● EPS: 0.58 ● In November 2023, The Carlyle Group agreed to sell its entire 28% stake in McDonald’s China operation to the hamburger chain operator for $1.8 billion, reaping a 6.7 times return. ● Carlyle recently closed its US buyout fund CP VIII at $14.8B, 20% less than the predecessor fund and far less than an initial $27B target set by then chief executive Kewsong Lee before his sudden exit in August 2022. Competitor Statistics from Q3 2023

AUM: $382B Revenue: $716.6M

Investment Thesis:

Founded in 1987, The Carlyle Group has built a solid reputation in the alternative-asset management industry. The global investment firm’s portfolio is broadly diversified across three business segments: private equity, global credit, and investment solutions. Carlyle relies on its reputation, broad product portfolio, and investment performance track record to raise capital and maintain its standing as a go-to firm for investors looking for exposure to alternative assets. However, Carlyle has struggled to reach its fundraising targets due to rising inflation and interest rates and their inability to cash their assets amidst volatility caused by global conflicts. My hold recommendation reflects the belief that although there are opportunities for the firm to perform above the market valuation given its strategy of cutting costs, diversifying its portfolio, and capturing more of its operating leverage, the firm faces too many macroeconomic challenges to draw a certain conclusion.

Valuation/Financial Modeling:

As of November 23, The Carlyle Group Inc. (CG) is trading at $32.57. I believe that this equity is slightly undervalued and will increase to $35.25 within this year. I arrived at this conclusion by conducting a comparative company analysis with Carlyle’s five industry competitors with similar capital structures and financial data including Blackstone, KKR, and Apollo, ultimately using an EV/EBITDA multiple to reach the implied share price.

Diversifying Portfolio and Growing AUM:

Carlyle’s portfolio is broadly diversified across its business segments: private equity (accounting for 40% of fee-earning AUM and 64% of base management fees during 2023), global credit (46% and 25%), and investment solutions (14% and 11%). Carlyle is currently taking advantage of the dislocation in the equity and credit markets to diversify operations into credit and investment solutions offerings, thereby reducing the firm's exposure to the current instability of the private equity market (private equity accounts for 39% of fee-earning AUM in 2023 compared to more than 75% during 2009).

Strategic Cost Cutting:

AUM: $1.007T Revenue: $2.541B AUM: $631B Revenue: $2.595B

The Carlyle Group Inc. (CG) No Cost is Sacred

In September 2023, the firm shut down its US consumer, media, and retail private equity investment group and has cut further jobs across its US buyout investment team to allocate these expenses to invest areas with better growth opportunities. The company reported a $40M drop in expenses on an annualized basis during the quarter, about 85% of which came from salary. CEO Harvey Schwartz has refocused on growing the firm’s credit and insurance-related investment assets, debt and equity underwriting operations, technology, and funds designed for UHNWIs. Schwartz has also expressed optimism that Carlyle’s fundraising efforts would improve in the fourth quarter as it targets buyouts in Asia alongside the areas listed above.

Khanh Nguyen | 11/23/2023

Carlyle and Major Competitors Stock Price and Volume Comparison (1Y)

Source: Capital IQ Risk Potential Illiquidity of Assets in Difficult Market Conditions: Carlyle’s private equity and real estate investments

are highly illiquid. Tightened credit conditions could limit the firm's ability to move into new investments, while weak economic conditions due to rising inflation, higher interest rates, volatility caused by conflicts in Europe and the Middle East, and potentially challenging conditions in equity and credit markets could negatively affect the value of the firm’s investments and its ability to cash out of these investments. The firm's real estate segment is also subjected to the risks inherent in the ownership and operation of real estate and related businesses and assets.

Stiff Competition for Investor Capital: Carlyle may face stiff competition for investor capital given that

investor capital has traditionally been dependent on manager reputation, fund size, and investment performance. Harvey Schwartz was recently named CEO in February 2023 following the unexpected firing of Kewsong Lee in August 2022. Given that management disruptions can cause investors to pause their investments until uncertainty in leadership is lifted, the investors’ hesitation may be detrimental to Carlyle’s operations. Additionally, competition for new investor capital will only intensify in the future, especially with more traditional asset managers like BlackRock increasing their exposure to alternatives and their willingness to be flexible on fees.

Reduction in Incentive-Based Fees: Given CEO Harvey Schwartz’s plans to pursue cost cuts throughout the fourth quarter and next year, there may be potential annual reductions in base management and performancebased fees after a persistent rise in expenses over the past years. If fees are reduced at a far greater rate than expected, it would have a major impact on the firm and lead to poor investment performance. Poor investment performance will then affect revenue, profitability, and cash flows which would obligate the firm to repay carried interest earned in prior periods. This would then have a negative impact on the company's ability to raise new capital for future investment funds, given that firms typically recycle distributions from earlier funds into new ones. Sources:

Jeremy Herring | 12/1/2023

Rating: Hold Current Price: $348.43 Price Target: $365 Company Updates ● 3Q23 Revenue: $11.8B ● Revenue YTD: $34.9B ● 3Q23 Net Income: $2.1B ● Net Income YTD: $6.5B ● 3Q23 ROE: 7.1% ● ROE YTD: 7.6% Competitor Statistics from Q3 2023

Goldman Sachs (GS) Trouble at the Top Investment Thesis:

Goldman Sachs maintains a stellar reputation as the leader of investment banking worldwide, however, that title is now being called into question. The business is hindered by a slowed market and internal frustrations such as an unfocused CEO and a debatably unsuccessful business partnership with Apple. My hold recommendation reflects a belief that even with substantial headwinds, Goldman’s proven business model and success within the industry will drive their business until concerns and interruptions have subsided.

Valuation/Financial Modeling:

As of December 3rd, Goldman Sachs (GS) is trading at $348.43. I believe that this equity is fairly valued and with a price target of $365.00 within this year. I arrived at this conclusion by conducting a comparable companies analysis (COMPS) against five companies of similar size, growth, and business models in the industry.

Apple Partnership: Revenue: $39.9B Net Income: $13.2B

Goldman Sachs and Apple (AAPL) undertook a partnership in 2019 to offer a branded credit card and consumer banking option to customers. The deal sounded both lucrative and poised for success due to Goldman and Apple being titans in their respective industries - the results have proven otherwise. Company executives and reports have shown unfavorable numbers, particularly in delinquency rates and net charge-offs for their credit cards. Further, reports have circulated that both Apple and Goldman are looking into mutually ending the relationship.

Revenue: $13.3B Net Income: $2.4B

Overview:

Revenue: $25.2B Net Income: $7.8B

Goldman has led investment banks in M&A fees for the past five years (JPM overtook them in 2Q23). The bank has promoted itself to be the premier investment banking service and clients have come to expect the old-school class when working with GS. The bank is looking to diversify its product offerings and services as we reach the new age of technology and banking.

In 3Q23, Goldman reported that profits and revenue both fell year over year. Revenue only dropped 1%, while net income dropped 33% in the quarter. As the market rebounds from Covid and an overly eager 2021, the key trends are higher expenses and stunted growth.

Jeremy Herring | 12/1/2023

Stock Price:

Source: Yahoo Finance Risk Potential Disco CEO: David Solomon the CEO of Goldman Sachs since late 2018 has recently found a new hobby -

DJing. While his extracurricular endeavors have stirred quite the buzz for several positive reasons, there is an increasing group of individuals who are concerned with his ability to manage a multi-billion dollar company and still partake in his partying lifestyle. His ability to multitask is yet to be seen, but he has stated that his primary focus will, and always will be the company while being its chief executive.

High Interest Rates: The Federal Reserve has raised interest rates to 5 - 5.25% in its ongoing battle to lower inflation. But this potentially has negative implications for the market, as raising rates is typically associated with slowing down the economy. As of now most experts believe we will avoid a recession and achieve a "soft landing". Nonetheless, Higher interest rates for an extended spell will dampen consumers’ desire to bring on new business Green Sky Sell-off: In October 2023, Goldman Sachs announced its intention to sell the GreenSky platform to

institutional investors to "narrow the focus of our consumer business”. The GreenSky platform, a Fintech company that specializes in buy now pay later services was acquired for $1.7 billion last year and is reportedly being sold for only $500 million. The loss is another mark against Solomon during his tenure at the bank.

Sources:

Kaleb Kavuma| 11/28/2023

Rating: Buy Current Price: $3.76 Price Target: $7.53 Company Updates ● 52-Week High: $5.47 ● 52-Week Low: $4.22 ● Market Cap: $237.8B ● LTM Revenue: $118.2B ● Cash & Equiv: $470.0B ● Net Debt: $245.1B Competitor Statistics from LTM Nov 2023

Industrial & Commercial Bank of China Great Wall of China Investment Thesis:

Given the current landscape of tightening global markets, investors in 2024 are shifting their focus towards dividends as a safer, more reliable source of earnings. This trend is expected to be influenced by the slower Total Social Financing (TSF) growth in the first quarter of 2024 recorded by the Chinese Central Bank. TSF, a broad measure of credit and liquidity in the economy used by China’s central bank, encompasses various forms of financing outside the conventional bank lending system. The slowdown in TSF growth suggests reduced liquidity or credit growth in the economy, prompting investors to seek stability in companies with attractive dividend yields. In this context, the Industrial and Commercial Bank of China (ICBC), with its substantial dividend yield of 9%, emerges as a particularly attractive option. The high yield indicates that ICBC could offer a strong potential for earnings on investments, making it a compelling choice for investors seeking stable and consistent returns in a challenging economic environment.

Valuation/Financial Modeling:

As of November 29th, ICBC is trading at $4.77 I believe that this equity is undervalued and expected to increase to $7.53 within this year. I arrived at this conclusion by conducting a ValuSum and comps analysis. Revenue: $122.4B Mkt Cap: $148.9B

Revenue: $97.7B Mkt Cap: $173.8B

Revenue: $98.5B Mkt Cap: $166.9B

Competitive Advantage

ICBC's status as one of the world's largest banks offers stability and trust in a volatile market. The bank's effective risk management and controlled nonperforming loan ratios further underscore its reliability. Additionally, the slowdown in Total Social Financing (TSF) growth, indicative of reduced liquidity in the Chinese economy, aligns with investor inclination towards secure investments like ICBC, known for its resilience and diversified global presence. This combination of high dividend yield, robust risk management, and global diversification makes ICBC a compelling choice for investors seeking stable and consistent returns amid economic uncertainties.

Overview:

The Industrial and Commercial Bank of China (ICBC), established in 1984 and publicly listed in 2006, is a major Chinese banking company. In 2023, it generated a revenue of 1.39 trillion CNY and a net income of 349.24 billion CNY. The bank, operating in segments like Corporate Banking, Personal Banking, and Treasury, reported an annualized return on assets of 0.86% and an equity return of 10.56%. Its non-performing loans ratio stood at 1.36%. ICBC also had a common equity tier 1 capital adequacy ratio of 13.39% and a total capital adequacy ratio of 18.79%.

Kaleb Kavuma| 11/28/2023

Graph:

Risk Potential Economic and Regulatory Risks: The primary risk involves the potential economic slowdown in China, as indicated by the slowdown in Total Social Financing (TSF). This slowdown could lead to a reduction in profitability for ICBC, impacting its ability to sustain high dividend yields. Additionally, being a state-owned entity, ICBC is heavily influenced by Chinese government policies and regulatory changes, which can be unpredictable. Regulatory shifts could significantly impact the bank's operational framework and profitability.

Interest Rate and Global Market Volatility Risks: ICBC's performance is subject to fluctuations in Interest rates set by the People’s Bank of China. An increase in interest rates could raise the cost of capital, affecting the bank's earnings and potentially its dividend payouts. Furthermore, global economic uncertainties, including trade tensions and geopolitical conflicts, could induce market volatility, affecting ICBC’s stock performance and financial stability.

Credit Quality and Dependency on Domestic Market Risks: A downturn in the Chinese economy could lead to an increase in non-performing loans, adversely affecting ICBC's asset quality and credit risk profile. Despite its international presence, ICBC's heavy reliance on the domestic Chinese market compounds this risk, making it more susceptible to localized economic crises or financial instabilities. This concentration could challenge the bank’s financial health and its ability to maintain consistent dividend payouts. Sources:

REAL ESTATE Real Estate

Sydney Jiang | 11/30/2023

Rating: Hold Current Price: $39.44 Price Target: $37.08 Company Updates ● 52 Week Range: 32.43-51.35 ● Market Cap: $13.7M ● Shares Outstanding: $341.6M ● P/E Ratio: 38.14

Competitor Statistics from FY 2022

MGM Resorts International (MGM) A Leader in Hospitality and Entertainment Investment Thesis:

MGM Resorts International, a prominent player in the hospitality and entertainment sector, operates a diversified portfolio of casino, hotel, and entertainment resorts across the United States and Macau. The company operates through three main segments: Las Vegas Strip Resorts, Regional Operations, and MGM China. As of December 31, 2022, MGM Resorts operated 17 domestic casino resorts and two in Macau. Its casino resorts offer hotel, entertainment, dining, retail, and gaming amenities, and casino operations include slots, table games, as well as online sports betting and iGaming through BetMGM. My hold recommendation reflects a belief that despite the stock’s overvaluation, MGM will continue to perform well, given its increasing revenue in MGM China post-pandemic and the vision for MGM Empire City.

Valuation/Financial Modeling:

Total Revenue: $5.7M

As of November 30, MGM Resorts International (MGM) is trading at $39.44. I believe that this equity is slightly overvalued and expected to decrease to $37.08 within this year. I arrived at this conclusion by conducting a Comparable Companies analysis using five companies from the same industry: Wynn Resorts, Limited, Las Vegas Sands Corp., Caesars Entertainment, Inc., PENN Entertainment, Inc., and Red Rock Resorts, Inc.

MGM China:

Total Revenue: $8.6M

Total Revenue: $11.52M

Total Revenue: $1.68B

Although visitation during 2020-2022 was significantly reduced by the COVID-19 pandemic, MGM China witnessed a notable 335% increase in net revenues over the nine-month period ended September 30, 2023. This growth is primarily due to a surge in casino revenue provided by main floor gaming operations. Amenities such as premium gaming lounges and stadium-style electronic tables have played a pivotal role in drawing players. Key gaming statistics for MGM China reveal a 359% increase in casino revenue for the nine months ended September 30, 2023, compared to 2022. The overall boost in revenue can be attributed to the lifting of COVID-19 travel restrictions in Macau, which is frequently regarded as the gaming capital of the world.

MGM Empire City Potential:

On November 30, 2023, MGM Resorts unveiled its vision to transform Empire City Casino into MGM Empire City, contingent upon the acquisition of a full-scale commercial casino license. This initiative represents a strategic move to elevate the property into a world-class entertainment destination, featuring a state-of-the-art BetMGM sportsbook, a 5,000-capacity entertainment venue, and the introduction of live-dealer table games. If successful, MGM will position itself as the foremost entertainment venue of its kind in Yonkers, New York.

Sydney Jiang | 11/30/2023

MGM Resorts International and Competitors

Source: Capital IQ Risk Potential Cybersecurity Incident: In September 2023, MGM Resorts suffered a cyberattack that resulted in a $100

million impact on third-quarter results. The breach disrupted operations, causing key card issues for hotel customers, email lockouts for employees, and temporary closures of slot machines. The compromise of customer data, including contact information, gender, date of birth, and driver’s license numbers, has posed a significant threat to the company's reputation and customer trust. MGM acknowledges that, despite regular assessments of their data security measures, they may not fully safeguard against aggressive threats such as this particular breach.

Labor Issues: As of December 31, 2022, approximately 38,000 employees were covered by collective bargaining

agreements. Prolonged disputes, labor unrest, strikes, and potential wage increases all have the potential to disrupt operations and result in significant additional costs. Negative publicity related to union messaging can also tarnish MGM's reputation and reduce customer demand.

Anika Mittle | 11/20/2023

Rating: Hold Current Price: $122.12 Price Target: $118.74 Company Updates ● 52 Week Range: 100.17 - 133.08 ● Earnings Per Share (EPS): 6.74 ● Market Cap: $46.053B ● PE Ratio: 18.21 ● Shares Outstanding: $326.24M

Simon Property Group (SPG) Leader of Retail Real Estate Investment Thesis:

Since Simon Property Group’s listing on the New York Stock Exchange in 1993, the stock has grown by about 450%. The company is a self-administered and self-managed real estate investment trust (REIT) which owns, develops, and manages premier shopping, dining, entertainment, and more. My hold recommendation reflects a belief that despite the stock’s overvaluation, Simon Property Group continues to experience stable growth amid changing macroeconomic conditions.

Valuation/Financial Modeling: Competitor Statistics from Q4 2022

Revenue: $1.4B Property Count: 170+

Revenue: $5.9B Property Count: 5,000+

As of November 20th, Simon Property Group (SPG) is trading at $122.12. I believe that this equity is slightly overvalued and expected to decrease to $118.74 within this year. I arrived at this conclusion by conducting a Comparative Companies Analysis using five companies with financial data within the same industry, such as Camden Property Trust, Prologis Inc., Boston Properties Inc., Federal Realty Investment Trust, and Ryman Hospitality Properties.

Diverse Portfolio:

Simon Property Group's diverse portfolio stands out as a strategic strength, encompassing a spectrum of retail properties that range from outlet centers to upscale shopping malls. This diversified approach provides the company with a robust foundation, allowing it to navigate the dynamic landscape of retail real estate effectively. By catering to a wide array of consumer preferences and retail segments, Simon Property Group mitigates risks associated with changes in market trends and economic conditions. The inclusion of outlet centers alongside premium shopping destinations showcases the company's ability to capture both value-conscious and high-end consumer markets. Today, the company’s diverse portfolio includes more than 250 properties in over 37 U.S. states and 14 countries. This comprehensive and balanced portfolio not only enhances the stability of Simon Property Group's earnings, but also positions the company as a versatile player in the competitive real estate industry.

Science Based Targets:

Revenue: $3.1B Property Count: 200+

Simon Property Group is dedicated to ambitious environmental goals, including a 68% reduction in carbon emissions from its energy consumption and a 20.9% reduction in tenant-related emissions by 2035. SPG also targets a 15% reduction in water consumption by 2030, increased recycling rates, and the integration of sustainable development guidelines in all projects. Committing to Science Based Targets, SPG has achieved a 31.27% reduction in direct energy consumption and a 65.05% reduction in its carbon footprint, aligning with sustainability rules set by the Science Based Targets initiative.

Anika Mittle | 11/20/2023

Simon Property Group Inc. and Competitors

Source: Yahoo Finance Risk Potential Inflation Risk: Inflation usually averages 2-3% yearly, but events like the 9.1% spike in Q2 2022 can burden

commercial land managers with higher costs, while tenants with long-term leases benefit. As a property lessor, setting rents too high risks losing potential tenants. You are constantly at risk of facing the consequences of high inflation in any type of business, with no control over the onset of an inflation crisis.

Changing Interest Rates: Often, mortgages for industrial and business homes have floating hobby prices.

Interest prices may be volatile; they’re suffering from everything – profits, credit, potential profits, monetary climate. Rising hobby prices growth loan payments, which growth hire prices required to generate profits for the investors. Rising hobby prices additionally reduce gift cost of coins glide and might flip a once-worthwhile funding to a non-starter. Even presently leased belongings can price a supervisor extra cash than it makes over time.

SECTOR ANALYSTS FALL 2023 Emiri Fukuchi Consumer & Retail ejf234@cornell.edu Arya Patel ESG & Energy acp236@cornell.edu Jeremy Herring & Laurent Vo Financials jdh363@cornell.edu lv232@cornell.edu Sarah Zhou Healthcare sz644@cornell.edu Avery Carter Real Estate atc77@cornell.edu Adelyn Carter Industrials ac964@cornell.edu Alexa Cooper & Raquel Kanner Telecommunications arc245@cornell.edu rk747@cornell.edu

Associates Fall 2023

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